China Loses One-Third of Billionaires; Apple Boosts iPhone Production in India | China in Focus

Welcome to China In Focus. I'm Tiffany Meyer. Our top story. China losing a third of its dollar billionaires in just three years. Plus a look at who made this year's top 10 list with many of them facing controversies in the U.S. The U.S. is cracking down on investments in China's tech sector. More on new rules targeting A.I. and other areas. The technology and the ability of China to reproduce the capacity to manufacture the chips at the highest end is sort of a game over. Senators are urging the Biden administration to close a loophole used by Chinese drug dealers. They say the criminals are using a duty-free program to smuggle fentanyl chemicals onto American soil. And China has detained a South Korean national on suspicion of espionage. The case is highlighting Beijing's tightened control over foreigners living in the country as an expanded anti-spy law gives authorities even greater power. China has lost a third of its dollar billionaires in the past three years, driving the trend weak economy and Beijing's crackdown on big tech. Dollar billionaires are those whose wealth is estimated at at least one billion dollars versus any other currency. The stat comes from research group Huron. The group's reports that China now has over 750 dollar billionaires and over 30 percent decline from the peak three years ago. Most of the super rich that made the top 10 are tech entrepreneurs, and quite a few of them have made significant inroads in the U.S. market. Like Zhang Yiming, former CEO of TikTok's parent company ByteDance, he became China's richest person with an asset of 49 billion dollars. TikTok has over 170 million users in the U.S. And there's also the owner of Timu coming in fourth place. The shopping app is now one of the most popular in America. The founder of Chinese tech giant Tencent ranks third, also making the top 10. The owner of CATL, world's largest maker of electric vehicle batteries, Ford plans to use CATL's technology and services in its own electric vehicle battery plant in Michigan. Worth noting, most of these Chinese companies have become immersed in controversy following their blockbuster successes. Two lawmakers, Congressman John Bolinar, chairman of the House Select China Committee, and Senator Marco Rubio, have called on the Pentagon to blacklist CATL. They accuse the battery maker of having positioned itself to become the primary battery supplier for the Chinese military. TikTok is also in hot water. It could get banned from American app stores by next January if it doesn't part ways with its Chinese ownership. The company is also facing multiple lawsuits, including one from the Justice Department, for allegedly failing to protect the online privacy rights of American children. As for Timu, lawmakers have asked for a briefing on it over concerns about the group of former communist officials in its leadership. The owner of drone maker DJI is also on the billionaire list. The Pentagon blacklisted DJI, saying it's a Chinese military company. Back to the list, the shift also reflects a new trend. Tech entrepreneurs are taking the spot of real estate tycoons in the top 10, following the collapse of China's real estate sector. That said, it might not be a good time to be among the super rich in China. Leader Xi Jinping has proposed an idea called common prosperity, raising concerns that Beijing would force the rich to share their wealth with the rest of the country. The federal government moves against AI in China. The Biden administration announced new rules on Monday. They will limit investments in AI and other technology sectors in China that could threaten national security. The rules were proposed in June by the Treasury Department. They were directed by an executive order signed by President Biden in August 2023. It covered semiconductors and microelectronics, quantum information technologies and certain AI systems. The rules cover technology like cutting-edge code-breaking computer systems or next-generation fighter jets. They are part of a broader push to prevent U.S. know-how from helping the Chinese regime to develop sophisticated technology. What are the national and economic security risks of semiconductors and legacy chips made in China? How would terrorists work to counter the threat? To discuss entities, Steve Lance sat down with Rick Switzer, technology advisor, former director of strategy and policy for the State Department and former senior political advisor at the Pentagon. Rick Switzer, thank you so much for joining. Oh, thanks for having me. Really appreciate having me in the studio. It's great to have you in the studio. Rick, so I want to get your thoughts. The Biden administration proposing to block imports of vehicles with certain components of countries of concern, specifically China and Russia. Talk to us about the national security implications of these semiconductors. I mean, semiconductors is a huge national security challenge for the United States, to be quite fair. And the autos is one specific area where the administration has chosen to focus. It's an important area. They should be allotted for trying to take this on. We have ignored at our payroll the importance of where chips are made for quite some time. Additionally, these things we call legacy chips, which are critically important. So think about everything that's in this studio and everything that's in the computer or laptop or cell phone of the people watching this right now, right? Those are loaded with legacy chips. So the world made about 1.3 trillion chips last year. The vast majority of those chips are legacy chips. And China has been investing and subsidizing its way into control of legacy chip production. There are certain segments of legacy chips today where China is already 70% of global production. And those legacy chips go into everything, right? Superpowers shouldn't run their national defense based upon some sort of notion that, oh, the other guy wouldn't do that because we wouldn't. So when you have these massive numbers of chips in the hundreds of billions now coming from China that are deeply embedded in all of these critical products, it opens up new vectors of risk. Rick, do you think that the greater threat lies in the supply chain issue or the technology aspect? That the technology and the ability of China to reproduce the capacity to manufacture the chips at the highest end is sort of a game over. But additionally, the supply chain and the legacy chips that go in there are similarly very, very complex and provide risk vectors for economic security that are not well recognized within the policy community in the United States. You have some folks talking about it, but clearly it has not inculcated into their calculus to the point that they actually are willing to take concrete action. Again, if Taiwan and Korea and the United States are not making legacy chips because it's not profitable, then what you find is that the PRC is more than happy to subsidize those and really drive competitors out of business. Rick Schweitzer, a driving force behind the Bipartisan Chips Act, really appreciate you sounding the alarm on these very important issues. Thanks a lot. The world's largest contract computer chipmaker just suspended shipments to China. Taiwan Semiconductor Manufacturing Company, or TSMC, cut off China-based chip designer SoftGo. Sources told Reuters the move was in response to a TSMC chip being found in a Huawei AI processor. Huawei is restricted from buying TSMC chips due to risks to U.S. national security. SoftGo said it had shared reports to TSMC to prove it's not connected to Huawei. Lawmakers say a U.S. customs program has been allowing Chinese-made fentanyl chemicals to enter the U.S. unchecked. Four U.S. senators urged the Biden administration to close the loophole in a letter Tuesday. Lawmakers alerted Treasury Secretary Janet Yellen and Homeland Security Secretary Alejandro Mayorkas to the issue. This program allows e-commerce shipments valued under $800 to enter the country duty-free with minimal paperwork and inspections. It's called the de minimis rule. However, a Reuters report revealed that Chinese drug traffickers take advantage of the program to bypass legal hurdles and smuggle fentanyl and precursor chemicals into the U.S. Last month, President Biden banned a batch of Chinese companies from using this program. Lawmakers call this a first step, adding that additional actions are necessary. Nearly four million packages pass through U.S. customs under this program daily, and about 60 percent of them are from China. But many have voiced concerns that tracking down on the program will lead to price increases and disruption of the e-commerce industry. The United States has approved a $2 billion arms sale to Taiwan, and the deal includes a first-time surface-to-air missile defense system. Here's more. Taiwan says the decision helps it boost defenses against China's threats. Last week, Beijing conducted military exercises around Taiwan, encircling the island. China has condemned the arms sale. Taiwan says stronger self-defense capabilities maintain regional stability. Former President Trump recently commented that Taiwan should pay the U.S. for its defenses. He also said the island took U.S. semiconductor business. Taiwan responded, saying ties between the countries are based on being like-minded democratic allies. Taiwan received strong backing from Trump during his presidency. Next, China confirmed the arrest and detention of a South Korean national on Tuesday. That's on suspicion of violating the country's anti-espionage law. This marks the first such case linked to South Korea since China revised its anti-espionage law last July. Beijing's foreign ministry said it already informed the South Korean embassy in China. South Korean news agency Yonhap said the person was a former employee of Samsung, a South Korean tech giant. The report added that he was suspected of leaking microchip-related information to the South Korean government. Korean broadcast network KBS signaled the same details. According to other media reports, the person is in his 50s and has been working in China for eight years. China expanded its anti-espionage law last year, granting Chinese authorities greater power to conduct searches and make arrests without clear legal processes. Critics say this case could further deter foreign investment and operations in China due to fear of wrongful detention. Coming up, in the face of challenges with the Chinese market, CEO Tim Cook has been expanding Apple's business and manufacturing in India, aiming to reduce the tech giant's reliance on China. A Swiss university is putting the brakes on cooperation with China. We look at why working with China's military institutions is a cause for concern. And China's preschool industry is shrinking as the country sees fewer and fewer newborns for three consecutive years. More on that after the break here on China In Focus. Welcome back to China In Focus. I'm Tiffany Meyer. Apple is boosting its iPhone production in India, part of its effort to significantly reduce its dependence on China. Exports of India-made iPhone have jumped by a third, valuing about $6 billion over the past six months. Last year, CEO Tim Cook opened Apple's first shops in India's two major cities, the capital New Delhi and financial hub Mumbai. Expanding its Indian production line and market comes as Apple faces challenges in its key market, China. Besides the sales drop-off fueled by Chinese competitors, an increasing number of state agencies in China have started banning staff from bringing iPhones to work. Tim Cook recently flew to China to meet with the country's technology minister. The event sparked speculation about whether Apple would use Chinese AI services in its iPhone's latest system, a move that would raise data security concerns. Chinese fast fashion brands are flooding the U.S. through an import loophole meant for small businesses. But it's not just bargain prices coming through. Some products contain alarming levels of toxic chemicals. Could tariffs proposed by former President Trump close the gateway? To discuss, we sat down with Casey Fleming. He's a national security expert and the CEO of Black Ops Partners. Casey also worked in the Office of Presidential Advance under three U.S. presidencies. Casey Fleming, thank you so much for joining us. Great to have you back on the show. Thank you for having me. Now, fast fashion and e-commerce brands Xi'an and Timu have been skirting U.S. import tariffs through a trade loophole known as the to help small businesses sell directly to consumers. But reports know it's not just the cheap goods that are flowing in, but also toxic chemicals like lead. One study saying some products from these sites had hundreds of times above the legal amount of toxic chemicals. How did these chemicals even get on these products? A lot of times it's through the processing of those products, but also CCP, to our understanding, actually adds harmful chemicals to the products they send to Americans. So that's really what's happening. Years ago, these products were like, for example, lumber. You would get flooring in your house. They have extreme levels of formaldehyde in them, and they would emit maldehyde up through the floors for your family, your babies, all the occupants. About 10 or 12 years ago, they had makeup at Claire's, and it was laced with asbestos. So moms were going out and buying these little makeup kits for nine-year-old, 10-year-old, 11-year-old girls, buying a whole stack of them for $9.99, and they're laced with formaldehyde. Vaping pens, vaping units, they also have cadmium burners. When you heat up that carcinogen, that carcinogenic metal, you're heating up that as well. So those are all known carcinogens, and the CCP has always viewed the United States as their enemy. So why wouldn't they try to poison us and to harm us and so on? Fentanyl is just another thing, but we're not talking about that today. President Trump has been saying, if he gets back into office, that he's going to be the tariff king. He's going to slap even more tariffs on Chinese imports, but imports in general. Now, if that does happen, would it be enough to screen these types of products that are coming in? Why would we actually even allow them to sell those goods in the United States to begin with, to fund an anti-American regime? Remember, it's communism versus freedom. So absolutely needs to ban that. All the products, I would ban anything coming from Xi Jinping and the whole list of other companies that are selling into the United States. And one reason I would do it is because as long as they're still manufacturing and selling fentanyl and distributing it throughout the United States through the Mexican cartels, as long as that's happening, you're not selling anything in the United States. Casey Fleming, thank you so much for your time. Thank you for having me. Taiwan said a French naval ship passed through the Taiwan Strait Monday night to demonstrate France's support for Taiwan. It's not France's first time selling the route. The French Navy also made a voyage there last year, while two German Navy ships sailed through the Strait in September. It's relatively rare for European countries to send their ships through the region, but the U.S. Navy transits the Strait once a month. The Chinese Communist Party claims that both Taiwan and the Strait are part of China. The CCP has never ruled Taiwan. China sent fighter jets patrolling near the island Sunday after the U.S. approved $2 billion in arms sales to Taiwan. Now we turn to Europe. A university in Switzerland is breaking off cooperation with a Chinese university. The Chinese Institute is one of seven universities most closely affiliated to the Chinese military. The Zurich University of the Arts terminated its contract with Harbin Institute of Technology. During their partnership, they founded a design school in the southern city of Shenzhen. The Swiss university did an analysis last year and found the risk of The Chinese university is on a U.S. government sanction list due to its link to the Chinese military. Luxury automakers in Europe are under pressure from Chinese rivals backed by Beijing. That's because the Chinese carmakers are selling their vehicles at a fraction of the cost. NTD's Sean Marshall has more on how they get price tags so low. Chinese auto manufacturers are getting in on the luxury vehicle game. In China, they're selling fancy cars subsidized by the government. And in Europe, you've got BYD's Yang Wang SUV and NIO's EP9 supercar. This is happening at the same time as Mercedes and Porsche are experiencing falling profits in China. Mercedes reported its weakest profitability since 2021. We don't take the competition lightly. I don't assume that the pressure will just go away said Harold Wilhelm, Mercedes' chief financial officer. According to a Bloomberg report, Porsche said it's weighing cost cuts and reviewing its model lineup after a demand slump in China caused earnings to plunge. The legacy and attraction of Porsche and Mercedes has traditionally given them a market advantage in the luxury market. But China's luxury cars are hitting the market for a fraction of the price. According to McKinsey & Company market research, luxury car sales continue to surpass the mass market in terms of growth, profitability, and buzz. Luxury vehicles also have some of the highest profit margins in the industry, and customers tend to be more loyal and make repeat purchases, making it a prime target for Chinese automakers. The European luxury buyer still loves his or her three-pointed star, said Michael Dunn, head of Dunn Insights LLC. Customers in the West do not attribute the same level of importance to the digital experience, at least not yet. Sean Marshall, NTD News. Cross-border issues between North and South Korea catching international attention. The latest issues tie into drones and trash balloons. Communist North Korea blames its southern neighbor for sending drones into northern territory for political purposes. On Monday, South Korea said that the blame was unilateral. Watch. Over the past 10 years, North Korea has permeated our South Korean airspace more than 12 times with drones, threatening our own safety. Instead of reflecting on this kind of behavior, North Korea is acting in a shameless manner, making unreasonable claims, while they are the ones who are making things wrong. On top of drones flying across the borders between North and South Korea, trash balloons are too, but only one way from North to the South. They contain trash materials like paper, vinyl and plastic bottles. Some even carried manure. From May to September, North Korea launched 5,500 trash balloons toward the South, about 50 balloons a day on average. China is facing an aging and shrinking population, which dropped by over two million people last year. That comes alongside a record low birth rate, with only six to seven births per thousand people, and the preschool industry is feeling the impact firsthand. The number of kindergartens in the country has plunged for two years in a row. According to official Chinese data, nearly 15,000 kindergartens shut down last year. The country issued a three-child policy back in 2021, featuring social benefits like tax deductions and other cash rewards, hoping to encourage more couples to start families. But still, fewer people want to get married or have kids in China. Many cite social pressures like financial burden, as well as pressure from the Chinese Communist Party's rule. That's all for today's China In Focus. I'm Tiffany Meyer. If you have any feedback on the show, or have something you'd like to see us cover, send us an email at ChinaInFocusNTD.com. We'd love to hear from you. For around-the-clock original news coverage, visit us at NTD.com or download our NTD app. Thanks for watching. See you tomorrow.